Why People Fail to Plan for Business Succession
More than 70% of the businesses do not get transitioned to the next generation. This is as a result of lack or ignorance of planning for the succession. It has become a very sensitive issue that has caused sibling rivalry, political power plays and tax hurdles. To avoid such occurrences, it is good to plan for the succession of the family business. Despite this, there are many other reasons that lead to family business succession failure.
There are a number of categories that explain the reasons for neglecting family business transition according to Fager and McKinney 2007. The pleasant times high is the first one. When things are going well, it is normal for people to ignore the hard experiences. Running the business is deemed to be much better when the person is still present no when they have left.
Businesses go through tough times such as theft by employees, accounting and a broken plant. These problems must be resolved. The long term effects of not planning for succession will negatively impact the company’s chances of success. Immortality complex is the other reason. The meaning of this is that many do not like to face the reality of death or sickness. This negatively impacts successful entrepreneurs. People neglect planning for business transition earlier on because of employee and family feuds.
When the family members involve their emotions or political views, the business will not be handled properly as it should. These issues make people to even fear planning for the future events. Sone people are not ready to leave behind their businesses. Most entrepreneurs feel they have reached greater heights. Most entrepreneurs feel they cannot let go of their businesses because of the time and effort they put in. People also ask themselves who will manage the business if they have left.
It is hard to understand tax hurdles during the event of selling or transitioning the business to the incumbents. Tax issues are then ignored and more urgent issues are dealt with. The other factor that causes neglect of succession planning is lack of faith in the successor and this can make one doubt the business too. Despite this, the business may have a reputable successor who can make the business more successful. Despite the above, the successor is normally faced with skepticism. This is one of the reasons why people ignore succession planning because this scenario is not pleasant. The failure rate in business transition is linked to the ignorance of succession planning. The effects of not attending to these issues in the short term will escalate in the long term.